State and Worker Capitalism

Regular readers will know that we are in favor of self-employment and worker cooperatives. And consequently we are in favor of government policies to stimulate the formation of worker cooperatives. Our ideal economy would be a version of worker capitalism, i.e. a system where there is no distinction between workers and capitalists (those who own the means of production).

Simultaneously we are sympathetic to the concept of state capitalism, i.e. a system in which the state has an active role as investor. Although this seems to be contradictory, we believe that state and worker capitalism could be reconciled and coexist in one system.

In our model of state capitalism the government is basically a venture investor. It invests money into new companies, in particular those businesses who are yet too risky for private investors. Once those state-owned enterprises become profitable the state will partially privatize those companies.

Now, there are several methods to privatize state-owned entreprises. Usually states prefer to sell off their shares through an IPO, though this in not the only possibility. There is nothing which would prevent the government to sell shares to the employees of these businesses.

Employees of state-owned entreprises could receive the option to receive a part of their wage in shares. This way a SOE will gradually become an employee-owned company. A potential problem is that the employee-shareholders might be tempted to sell their shares to cash in. However, this could be prevented by creating restricted shares, which could only be sold to other employees or to the company.

An interesting possibility would be the following. Before privatizing an SOE the government could create two classes of shares, A and B. Class A shares are restricted but give both voting rights and entitlement to dividend to the share holders. On the other hand class B shares could freely traded but do not give voting right, though they entitle the owner to dividend payments. Class A shares will only available to the company’s employees, while class B shares will be available to the general public.

This arrangement has several benefits. Firstly, it gives the company access to external funding without risking hostile take-overs and secondly it allows ordinary citizens to spread the risks of their investments.

See also

The Mordan Domestic Investment Fund